The US Postal Service today announced a lower Q3 loss but a higher overall nine-month loss andagain warned it would default on government payments at the year-end without major legal changes to
its financial obligations.The US postal operator ended its April – June 2011 third quarter with a net loss of $3.1billion, compared to a net loss of $3.5 billion for the same period in FY 2010. But net losses forthe nine months ended June 30 amounted to $5.7 billion in 2011 compared to $5.4 billion in 2010.
USPS operating revenue fell 1.7 per cent to $15.8 billion and total mail volume dropped 2.6per cent to 39.8 billion pieces. Lower First-Class Mail volume due to the weak US economy andcontinuing electronic substitution was the key factor but Shipping Services achieved growth.
Mailing Services revenue declined 3.1 per cent to $13.6 billion while volume was 2.7 per centlower at 39.5 billion pieces. First-Class Mail revenue dropped 8.7 per cent to $7.8 billion onvolume of 17.7 billion pieces. Slower Standard Mail increased revenue by 1.7 per cent to $4.2billion on volume of 19.8 billion pieces. Package Services revenue increased 3.2 per cent to $354million on volume of 143 million pieces.
Shipping Services, covering products competing in the open market and including Express Mailand Priority Mail, increased Q3 revenue by 7.3 per cent to $2.2 billion and volumes increased 5.9per cent to 359 million pieces.
“We continue to take aggressive actions to reduce costs and bring the size of ourinfrastructure into alignment with reduced customer demand,” said Postmaster General and CEOPatrick Donahoe.
The Postal Service said it is aggressively reducing expenses, including organisationalredesign initiatives. Work hours were reduced by 9.2 million hours or 3.1 per cent in the thirdquarter compared to the same period a year ago. During the first nine months of 2011, 2.8 per centfewer work hours were used compared to 2010. The third quarter saw the voluntary retirement of morethan 1,850 administrative employees as part of the current restructuring initiative.
In addition, USPS announced plans on July 25 to identify and study nearly 3,700under-utilised Post Offices for possible closure and introduced the new Village Post Officeconcept.
But even with significant cost reductions and revenue growth initiatives, current financialprojections indicate the Postal Service will have a cash shortfall and will have reached itsstatutory borrowing limit by the end of the fiscal year, the organisation said. Without substantiallegislative change, the Postal Service will be forced to default on payments to the federalgovernment.
“Since the passage of the Postal Accountability and Enhancement Act of 2006 (PAEA), thePostal Service has contributed more than $37 billion to a trust fund for future retiree healthbenefits,” said Joseph Corbett, CFO and executive vice president. “We are experiencing a severecash crisis and are unable to continue to maintain the aggressive prepayment schedule that wasmandated in the PAEA. Without changes in the law, the Postal Service will be unable to make the$5.5 billion mandated prepayment due in September.”
